DLF plans several listed subsidiaries

New Delhi: India’s largest listed developer, DLF Ltd, which raised some Rs9,000 crore in its first share sale in July, is looking at the possibility of selling stakes in various businesses that will become separate companies.

Listing gains: Ramesh Sanka, chief financial officer, DLF Ltd.

“Each entity of DLF is phenomenally big. We are quite sure we want to go for a listing of each of the entities at a right time," says Ramesh Sanka, DLF’s chief financial officer. “We will nurture them (entities) and then we will hive off whether it is insurance, telecom, hotels or even the residential business."

“In the next eight-nine months to three years, lots of listings will happen," predicts Sanka. The offices’ arm of DLF is already getting indirectly listed through DLF Assets Pvt. Ltd, a unit.

The company is looking at selling 10-20% stakes in the subsidiaries.

DLF’s July offer was the largest initial public share offer in India and the shares have risen 92.4%, to Rs1,010.05 a share, since its listing. Since August, the company has more than doubled its market capitalization while the benchmark Sensex index has risen 25%. DLF became part of the Bombay Stock Exchange Sensex index in November.

Despite this, “today, valuing DLF is a very difficult task," claims Sanka. “But, tomorrow, if I have six-seven subsidiaries, a single business matrix is easy to value. Even for analysts, it is quite difficult to put a value on DLF."

DLF now has many business lines that go beyond building homes, shopping malls and offices. It has announced partnerships to set up hotels with Hilton Hotels Corp.; it is bidding for telecom licences to offer mobile phone services in one of the fastest growing cellphone markets in the world; it plans to offer insurance services and wants to build airports, roads and ports.

DLF will initially expand the entities in terms of employees and basic assets before hiving them into separate companies. The company might even look at listing the entities as real estate investment trusts in India once the market regulator, Securities and Exchange Board of India, lays down rules on real estate investment trusts, which is expected early in 2008.

“We think real estate investment trusts will open up in India, so then there will be lots of opportunities for listing," Sanka said.

DLF has some 224 million sq. ft of existing development and 738 million sq. ft of planned projects.

DLF Assets plans to go in for an initial public offering on the Singapore Stock Exchange through DLF Offices Trust, the real estate investment trust of DLF Assets. DLF Offices Trust holds some of the office properties of DLF. The company declined to say how many properties are held through this, nor did it give the amount it plans to raise as the Singapore Exchange rules do not allow the company to disclose these details at a preliminary stage.

DLF has filed for a listing of DLF Assets and it expects the listing to happen in the first quarter of fiscal 2008. The details of the prospectus will be made public by January. DLF Assets was established to hold completed commercial assets. The developer said DLF Assets bids for buildings along with other companies when DLF sells off assets.

Separately, DLF said it plans to double its investment in the power business. The company has wind energy farms and captive power plants to supply power to its projects. DLF invested Rs1,000 crore this year in its power business and during the next year, it plans to invest at least Rs2,000 crore.

DLF posted revenues of Rs4,053.30 crore and a net profit of Rs1,933.65 crore for the year ended March. That revenue figure includes sales and other income, which the company calls total revenue. Though DLF has not given any comparables for its financial results in the last two quarters, according to Sanka, the profit in the second quarter alone was higher than 2007. In the second quarter of 2007, the company posted a net profit of Rs2,018.55 crore.

“The growth is very, very high. The growth compared to last year is four times more," Sanka said, without providing numbers.